Canada Pension Plan Investment Board is close to buying a 49 percent stake in Manhattan’s 1 Park Ave., a prewar office tower controlled by Vornado Realty Trust, according to a person with knowledge of the deal.
Vornado would keep the majority stake in the 20-story, 925,000-square-foot (86,000-square-meter) building, said the person, who asked not to be named because the negotiations are private. The transaction, which is close to completion, would value the property at $565 million, the person said.
The purchase by Canada’s largest pension fund would be the latest demonstration of that country’s demand for U.S. real estate, particularly in New York City, said Dan Fasulo, managing director at research firm Real Capital Analytics Inc. Canadians are the biggest foreign buyers of commercial property in America, spending $11.4 billion in 2013, Real Capital data show.
“Canadians, particularly institutional money managers, REITs, pension funds, are flush with capital due to the strong environment in Canada, and frankly they’ve run out of things to buy,” Fasulo said in a telephone interview. “It shouldn’t surprise anyone that they would look to the U.S. to allocate some of that money.”
Of their $11.4 billion in purchases last year, $1.4 billion was planted in New York, making Canada the market’s second-largest source of foreign real estate capital, behind the $2.4 billion in deals by the Chinese, according to Real Capital.
Mae Chong, a spokeswoman for Canada Pension, said the Toronto-based fund “does not comment on deals that may or may not be taking place.” Mark Semer, a spokesman for New York-based Vornado, declined to comment.
Canada Pension’s most recent New York acquisition was in early 2012, when it bought a stake in 10 East 53rd St. The majority owner of the 388,000-square-foot tower is SL Green Realty Corp., Manhattan’s largest office landlord.
“There’s a theme of Canadian investors partnering with some of the savviest guys in the business,” Fasulo said.
Last month, Oxford Properties Group, the Toronto-based arm of Ontario Municipal Employees Retirement System, was part of a joint venture that paid $546 million for 450 Park Ave., which at $1,698 a square foot made it one of the most valuable skyscrapers ever sold. Oxford is also a partner with Related Cos. on Hudson Yards, the $20 billion development on Manhattan’s far west side.
Ivanhoe Cambridge Inc., the Montreal-based real estate unit of pension fund Caisse de Depot et Placement du Quebec, in October acquired a 51 percent interest in the News Corp. Building at 1211 Avenue of the Americas, near Rockefeller Center, in a deal that valued the tower at about $1.7 billion.
While Vornado sought a buyer for the entire 1 Park Ave. tower, it also considered offers for partial interests, said the person with knowledge of the pending sale.
Vornado bought a 95 percent stake in the tower in 2011 in a deal that valued it at about $427 million. One of the sellers, Norman Sturner’s Murray Hill Properties, kept a 5 percent stake, which under the current negotiations would become part of Canada Pension’s share, the person said.
New York University’s Langone Medical Center, which occupies about half the building and is its largest tenant, extended its lease to 2041 after Vornado’s purchase. About 135,000 square feet is listed as available, according to CoStar Group Inc., a Washington-based firm that tracks office leasing.
The sellers were represented by Doug Harmon and Adam Spies of Eastdil Secured LLC. Martha Wallau, a spokeswoman for the brokerage, declined to comment. Edna Lassiter, a Murray Hill Properties spokeswoman, didn’t immediately return a voice-mail seeking comment.
Canada Pension manages retirement savings for 18 million Canadians from every province but Quebec. The firm managed $219.1 billion of assets as of March 31, with 11.6 percent in real estate, according to its website.